Article 108. Application for conditional tax exemption

1. In the cases mentioned in Clause 1, Clause 2, Clause 3, Clause 4 Article 107, the application for xmt consists of:

a) A written request for tax exemption submitted by the user of exported or imported goods (except for Point c.1 of this Clause) which specifies the value, tax, reasons for conditional tax exemption, customs declaration number(s): 01 original copy

b) A sale contract (if any): 01 photocopy;

c) Other documents on a case-by-case basis as follows:

c.1) A written request for conditional tax exemption made by the Ministry of National Defense, the Ministry of Public Security or a unit authorized by the Ministry of National Defense or the Ministry of Public Security specifying that goods are imported to serve national defense and security and funded by central/local budget; quantity, categories, value of imported goods; tax amount, customs declaration number(s) (and a monitoring sheet if the partial shipments of imported goods are permitted);

c.2) The import entrustment contract (in case of entrustment) or notice of successful bidder enclosed with the goods supply contract (if goods are imported through bidding), which specifies that the prices are exclusive of import tax: 01 photocopy;

c.3) A decision to approve the research and list of necessary goods to be imported made by the regulatory Ministry if goods are imported to serve scientific research: 01 photocopy of the decision, 01 photocopy of the list of necessary goods enclosed with the originals for comparison (a monitoring sheet must be enclosed if partial shipments of imported goods are permitted);

c.3) A decision to approve the project of investment in equipment and and the list of equipment to be imported made by the regulatory Ministry if goods are imported to serve education and training: 01 photocopy of the decision (a monitoring sheet must be enclosed if partial shipments of imported goods are permitted);

c.5) If goods are gifts or samples:

c.5.1) A notice or decision or agreement of giving goods; a notice or agreement on shipment of samples: 01 photocopy;

c.5.2) If temporarily imported goods are kept as gifts for Vietnamese entities instead of being re-exported, it is required to have a license issued by a competent authority and the quantity must not exceed the allowance prescribed by the Government;

c.5.3) A confirmation made by a superior agency of the permission to receive tax-free goods that are used as gifts whose value exceed the tax-free allowance for a public administration unit, socio-political organization, socio-political-professional organization, socio-professional organization, economic organization, social organization which is funded by state budget beyond the allowance for conditional tax exemption.

2. In case of damaged materials, machinery and equipment that are imported for inward processing or manufacturing of goods for export prescribed in Clause 5 Article 107 of this Circular, the application for conditional tax exemption of import tax or cancellation of VAT when goods are imported consists of:

a) A written request for exemption of import tax or cancellation of VAT on the imported materials, machinery and equipment that are totally damaged and unusable. The request must specifies the reason for damage, ratio of damage, customs declaration number, amount of tax to be exempt, and the commitment to take legal responsibility for the declaration: 01 original copy;

b) A written confirmation of the conflagration made by the local fire department; a written confirmation of a the People’s Committee of the commune where the natural disaster or accident occurs: 01 original copy;

The aforementioned documents must be made right after the natural disaster, conflagration, or accident occurs.

c) A certification made by a professional analysis service provider of the quantity of imported materials, machinery and equipment that are damaged, the damage ratio of imported goods, or the fact that goods are no longer usable: 01 photocopy;

d) A insurance contracts, notice of indemnity payment made by the insurer (if any): 01 photocopy;

dd) The insurer’s confirmation that the insurance contract does not cover loss of tax: 01 photocopy.

If the damaged shipment is not insured, the taxpayer must have specify that goods are not insured on the written request mentioned in Point a of this Clause.

3. In case of paper-based customs declaration, the paper declaration must be submitted in addition to the documents mentioned in Clause 1 and Clause 2 of this Article.

1. Submission and receipt of the application for xmt

a) The taxpayer sumbits the application to the customs authority competent to consider tax exemption as prescribed in Article 110 of this Circular. If the case must be considered by the Ministry of Finance, the taxpayer shall submit the application to the General Department of Customs.

If imported goods are eligible for conditional tax exemption, the application must be submitted within 30 working days from the day on which goods are granted customs clearance or released.

In case materials, machinery and equipment that are imported for inward processing or manufacturing of goods for export are damaged because of a natural disaster, conflagration, or accident, the application must be submitted within 30 working days from the day on which the damage is confirmed by a competent authority;

b) If the application is submitted directly at a customs authority, the customs official shall receive it and append a seal on the application, write the receipt time and documents in the application;

c) If the application is sent by post, the Sub-department of Customs shall write the receipt date on the logbook of the customs authority;

d) If the application is submitted electronically, it shall be received, checked, and accepted via the System.

2. The customs authority is responsible for examining the application submitted by the taxpayer and perform the following tasks:

a) If the application is not satisfactory, the tax authority shall notify the taxpayer within 03 working days from the day on which it is received;

b) The customs authority shall check the consistency between the declaration on the System and the application.

If goods are imported to seve national defense and security, the customs authority shall compare the application with the lists of goods serving national defense and security compiled by the Ministry of National Defense and the Ministry of Public Security;

c) Within 15 days from the day on which the satisfactory application is received, the customs authority shall issue a decision on tax exemption, or notify the taxpayer of the reasons for rejection and the amount of tax payable if the application is rejected. If site inspection is necessary, the said time limit may be extended up to 40 days from the day on which the satisfactory application is received.

If the taxpayer has submitted a satisfactory application while following customs procedures, the customs authority shall examine the application, conditions for conditional tax exemption, and grant tax exemption within the time limit for completion of customs procedures prescribed in Article 23 of the Law on Customs;

d) In case materials, machinery and equipment imported for inward processing or manufacturing of goods for export are damaged, the customs authority shall examine accounting records and inventory documents related to the damaged shipment; compare the transactions of the taxpayer to determine the level of damage and make sure damage is caused by a natural disaster, conflagration, or accident; all of the imported goods are totally damaged, unusable, cannot be sold on the domestic market or exported.

The inspection must be completed within 40 days from the day on which the satisfactory application is received.

If the inspection result shows that the imported materials, machinery and equipment are eligible for tax exemption or tax cancellation, the Customs Department where import procedures are followed shall issue a decision on exemption of import tax or cancellation of VAT on damaged goods, which is the basis for tax refund (if any).

3. On the basis of the decision on tax exemption, the customs authority where the customs declaration is registered shall record the amount of exempt tax on the System.

1. The Ministry of Finance shall consider exemption of tax on goods that are gifts whose value exceeds the tax-free allowance prescribed in Clause 4 Article 107 of this Circular.

2. The General Department of Customs shall decide exemption of tax on imported goods serving national defense and security.

3. Customs Department where import procedures are followed shall consider granting exemption of tax on:

a) Dedicated goods serving scientific research, education and training;

g) Materials, machinery and equipment imported for inward processing or manufacturing of goods for export that are damaged.

4. The Sub-department of Customs where import procedures are followed shall grant tax exemption for goods that gifts whose value does not exceed the tax-free allowance prescribed by the Prime Minister.

Section 3. Cases of conditional tax reduction, procedures for granting conditional tax reduction

Article 111. Cases of conditional tax reduction

1. If exported or imported goods under supervision of the customs are lost or damaged, a tax reduction that is corresponding to the damage to the goods shall be considered if such damage is confirmed by a competent analysis organization.

2. Materials, machinery and equipment imported for inward processing or manufacturing of goods for export are partially damaged because of a natural disaster, conflagration, accident, but are still usable shall be granted a reduction in import tax and VAT upon importation which is corresponding to the damage ratio if all of the conditions below are satisfied: (unless the damage is caused by violations of law in the HD981 standoff event, to which other instructions of the Ministry of Finance apply):

a) Goods have been granted customs clearance, and a competent authority determines the damage ratio and that the damage is caused by a natural disaster, conflagration, or accident;

b) The customs have examined accounting records and relevant documents and concluded that the goods are not sold on Vietnam’s market or exported to abroad.

In case the damaged materials, machinery and equipment are insured and the insurer has provided indemnity against the damage, including import tax and VAT, then import tax and VAT shall not be reduced.

1. The taxpayer shall submit the following documents:

a) A written request for tax reduction which specifies the types of goods, quantity, value, tax amount, reasons for reduction, customs declaration number(s); a commitment to provide accurate information: 01 original copy.

In case materials, machinery and equipment imported for inward processing or manufacturing of goods for export are damaged as prescribed in Clause 2 Article 111 of this Circular, the written request for reduction of import tax and VAT must specify the reasons and damage ratio, the level of reduction, and a commitment to take legal responsibility for the declaration;

b) A written confirmation of the conflagration made by the local fire department; a written confirmation of a the People’s Committee of the commune where the natural disaster or accident occurs: 01 original copy (in the case mentioned in Clause 2 Article 111 of this Circular);

c) A certification made by a professional analysis service provider of the quantity of imported materials, machinery and equipment that are damaged or damage ratio: 01 original copy;

d) A insurance contracts, notice of indemnity payment made by the insurer (if any): 01 photocopy;

dd) A contract/agreement for compensatiaon made by the shipping company if the damage is caused by the shipping company: 01 photocopy.

If the exported or imported goods mentioned in Article 111 of this Circular are not insured, the application shall not include the documents mentioned in Point d and Point dd of this Clause, and the taxpayer must make a commitment that insurance is not bought in the written request mentioned in Point a of this Clause; if the insurance contract does not cover tax loss, it must be certified by a the insurer: 01 original copy.

2. In case of paper-based customs declaration, the declarant shall must submit the original declaration in addition to the documents mentioned in Clause 1.

1. Procedures for considering tax reduction are similar to procedures for considering tax exemption.

2. The Director of the Sub-department of Customs where customs procedures are followed are entitled to consider tax reduction.

Section 4. Tax refund, tax cancellation; procedures for tax refund, tax cancellation

Article 114. Cases of tax refund

1. Goods that are still stored at the checkpoint after import tax has been paid and being supervised by the customs, and then re-exported to abroad.

2. Goods on which export/import tax has been paid but are not actually exported/imported.

3. Goods on which export/import tax has been paid but a smaller quantity is actually exported/imported.

4. Imported goods to be delivered/sold to abroad via agents in Vietnam; imported goods to be sold to means of transport of foreign companies on international routes through Vietnam’s ports and Vietnamese means of transport on international routes as prescribed by the Government.

5. Imported goods on which import tax has been paid that are used for manufacturing products that are exported to abroad or a free trade zone shall receive a tax refund in proportion to the quantity of exported goods. Export tax on exported goods is exempt if there is ample basis to determine that such goods are made entirely of imported materials/supplies. Particularly:

a) If exported products are entirely made of imported materials/supplies, export tax is exempt. If exported products are made of both imported and domestic materials, export tax shall be imposed on the quantity of domestic materials/supplies used for manufacturing of such products at corresponding rate of export tax on such products;

b) Materials/supplies on which import tax is refuded include:

b.1) Imported materials/supplies (including components, semi-finished products, packages) that form the exported products;

b.2) Materials/supplies that are direcly used for the manufacturing of exported products but do not form the products such as paper, chalk, pens, markers, pins, printing ink, glue brushes, printing frames, erasers, polishing oil, etc;

b.3) Imported finished products that are assembled into exported products (or pakced with exported products made of imported materials/supplies, or packed with exported products made of domestic materials/supplies) to create full packs for export;

b.4) Imported components and spare parts serving repair of exported products;

b.5) Goods imported as samples for manufacturing of goods for export that are returned to the foreign client after the contract is completed.

c) Tax refund shall be considered in the following cases:

c.1) An entity imports materials/supplies for manufacturing of goods for export or hires domestic contract manufacturers (including those in free trade zones), overseas contract manufacturers, or cooperate in manufacturing goods to be exported and receive products for export;

c.2) An entity imports materials/supplies to manufacture goods for sale in Vietnam, but then uses them to manufacture goods to be exported which are then actually exported (the time limit is 02 years from the registration date of the customs declaration of imported materials/supplies to the registration date of the customs declaration of exported goods made of such materials/supplies)

c.3) In case an entity actively imports materials/supplies (other than finished products) to perform a processing contract without being required by the foreign entity, when goods are exported, refund of import tax shall be considered similarly to the case in which materials/supplies improted for manufacturing goods to be exported;

c.4) An entity imports materials/supplies to manufacture certain products and then uses such products to process goods for export under a processing contract with a foreign party;

c.5) An entity imports materials/supplies to manufacture certain products, then sell such products (whether finished products or unfinished products) to another entity for further processing. After the latter has exported products to abroad, the importer of materials/supplies shall receive a refund of import tax in proportion to the quantity of materials/supplies used for manufacturing of exported products provided the following conditions are satisfied: the seller and the buyer pay VAT using credit-invoice method; the importer has obtained a TIN and has a sale invoice for the trading of goods;

c.5) In case an entity imports materials/supplies to manufacture certain products, then sell such products (whether finished products or unfinished products) to another entity for exporting as knock-down kits, a refund of import tax that is in proportion to the ratio of exported products shall be considered if the conditions mentioned in Point c.5 of this Clause and the following conditions are satisfied:

c.6.1) The products made of imported materials/supplies are parts, components of exported knock-down kits;

c.6.2) Products are bought to be combined with the components, parts manufactured by the buyer to create the exported knock-down kits.

c.7) An entity imports materials/supplies to manufacture certain products, then sell such products (whether finished products or unfinished products) to another entity for direct export to abroad. After products are exported by the buyer, the importer shall receive a refund of import tax in proportion to the quantity of exported goods if the conditions mentioned in Point c.5 of this Clause are satisfied;

c.8) In case an entity imports materials/supplies to manufacture products that are sold to a foreign trader who requires that goods be delivered to another entity in Vietnam, the import tax on materials/supplies used for manufacturing of goods for export shall be refunded:

c.8.1. Conditions for refund of tax on imported materials/supplies:

c.8.1.1) The goods received by the local importer must be used for further manufacturing or inward processing under a processing contract with a foreign party (the customs authority shall keep monitoring the domestic importer);

c.8.1.2) The purpose written on the declaration shall be manufacturing of goods for export or inward processing if the local importer uses the products for further manufacturing or inward processing.

c.8.2) If the customs has collected import tax from the initial importer when materials/supplies are imported from abroad to Vietnam and also import tax on locally imported products from the local importer, the initial importer shall receive a refund of import tax on the imported materials/supplies after the local importer of goods has paid import tax for the locally imported goods (except for the case mentioned in Point c.8.1.1 of this Clause).

c.9) Materials/supplies imported for manufacturing of goods for export mentioned in Points c.1 – c.7 have been exported to abroad but are not actually sold to overseas customers and are still kept at the exporter’s overseas warehouse or in an overseas bonded warehouse or transshipment port;

c.10) In case materials/supplies imported for manufacturing goods for export mentioned in Points c.1 – c.7 are eventually exported to a free trade zone and used therein or exported from the free trade zone to abroad, the paid import tax on the quantity of goods used in the free trade zone or exported from the free trade zone to abrad shal be refunded;

d) If multiple types of products are obtained from a type of imported materials/supplies but only one of them is exported, the tax on the quantity of materials/supplies that are not exported must be declared and paid.

The amount of tax to be refunded is calculated as follows:

d.1) Value of exported products equals (=) the quantity of exported products multiplied by (x) their dutiable value;

d.2) Total value of products obtain is the total value of exported products and the revenue from domestic sale of products (inclusive of waste, rejects above the norms and exclusive of output VAT).

In case multiple types of products are obtained from one type of imported materials/supplies (e.g. wheat is imported to produce wheat flour, wheat mash, and wheat husk) and one or some of the types of products are used for manufacturing of goods for export, the other are used for domestic sale (e.g. wheat mash and wheat husk are used for domestic sale; wheat flour is used for manufacturing exported instant noodles), then:

d.2.1) When calculating the value of export ptoducts and total value of products obtained, the amount of materials/supplies bought inland must be removed (e.g. apart from wheat flour, other materials/supplies such as flavorings, seasonings, packages, etc. are bought inland);

d.2.2) The manufacturer must establish the norms of domestic materials/supplies used in an exported product as the basis for removing domestic materials/supplies from exported products. If the norm is suspected, the tax-refunding authority may request a specialized agency in charge of the commodities to cooperate with the local tax authority (which issues the TIN to the exporter) in carrying out an inspection at the manufacturer’s premises.

dd) In case materials/supplies are imported for manufacturing of goods for export and such products are exported by the deadline for paying tax, import tax on the quantity of materials/supplies proportional to the quantity of exported products shall not be paid.

6. In case temporarily imported goods, temporarily exported goods, goods imported under an entrustment contract with a foreign party and then re-exported, including imported goods that are re-exported to a free trade zone (and used therein or exported from the free trade zone to abroad, except for special economic zonea, trade – industry zones, and other economic zones to which sepearte instructions of the Ministry of Finance apply), import tax/export tax that has been paid shall be refunded and import/export tax shall be exempt when he products are re-imported/re-exported (unless tax exemption is granted as prescribed in Clause 1 Article 103 of this Circular).

In case temporarily imported/exported goods have been actually re-exported/re-imported by the deadline for paying tax, import tax/export tax on the quantity of re-exported/re-imported goods shall be cancelled.

7. If exported goods has to be imported back to Vietnam, export tax that was paid shall be redunded and import tax shall be cancelled.

a) Refund of export tax and cancellation of import tax is only granted if goods are have not been used for manufacturing, processing, repair overseas, or used overseas;

b) If exported goods that are processed by an Vietnamese contract manufacturer under a contract with a foreign party who is exempt from import tax on materials/supplies have to be imported back to Vietnam for repair, recycling, and then re-exported to abroad, the customs authority in charge of the initial processing contract must keep monitoring until recycled goods are completely exported.

Where recycled goods are not exported:

b.1) Tax shall be declared and paid if goods are sold domestically;

b.2) If goods have to be and are permitted to be destroyed in Vietnam, and the destruction is supervised by a customs authority, they are exempt from tax as if destructed waste and rejects.

c) In case of imported goods made of imported materials/supplies; goods temporarily imported for re-export (which are eligible for tax refund upon exportation) that must be imported back to Vietnam but are not recycled and re-exported:

c.1) Tax on the quantity of imported materials used for manufacturing the quantity of exported or re-exported goods that have to be imported back to Vietnam refunded or cancelled (in case tax is yet to be paid);

c.2) If tax has been refunded or cancelled by the customs authority, the taxpayer must return or pay such amount of tax to the customs authority.

d) If exported goods are imported back to Vietnam by the deadline for paying export tax, export tax on the quantity of imported goods shall be cancelled.

8. In case imported goods have to be re-exported to the foreign owners or re-exported to a third country or re-exported to a free trade zone (to be used therein or exported from the free trade zone to abroad, except for special economic zonea, trade – industry zones, and other economic zones to which sepearte instructions of the Ministry of Finance apply), import tax on the quantity of goods that are actually re-exported shall be refunded and export tax shall be cancelled.

a) Conditions for refund of import tax that has been paid and cancellation of export tax:

a.1) Goods have not been used for manufacturing, processing, repair in Vietnam, or used in Vietnam;

a.2) If imported goods are not consistent with the contract, it is required to have a notice of goods analysis result provided by a competent agency or a written agreement to receive goods of the foreign goods owner. The taxpayer must declare and pay import tax on the quantity of goods sent by the foreign party to replace the quantity of goods re-exported;

a.3) Goods exported to a free trade zone (except for special economic zonea, trade – industry zones, and other economic zones to which sepearte instructions of the Ministry of Finance apply) are used within the free trade zone or have been exported from the free trade zone to abroad.

b) With regard to imported alcohol, beer, tobacco, timber that are then re-exported, the customs authority shall inspect the entire shipment upon exportation to check the equivalence of exported goods and imported goods;

c) If imported goods are re-exported by deadline for paying import tax, then import tax on the quantity of re-exported goods shall be cancelled.

9. With regard to machinery, equipment, instruments, means of transported that are permitted to be temporarily imported for re-export (in case of leasing) to execute projects of construction, installation, manufacturing, import tax that was paid shall be refunded when they are re-exported from Vietnam or to a free trade zone (for use within the free trade zone or export from the free trade zone to abroad.

The amount of refunded import tax shall be determined on the basis of the remaining use value of machinery, equipment, instruments, means of transported when they are re-exported according to the period over which they are used and kept in Vietnam (from the registration date of the temporary import declaration to the registration date of the re-export declaration). Tax shall not be refunded if they are no longer usable. The taxpayer shall declare and take responsibility for the depreciation ratio of goods over the said period Vietnam as prescribed by relevant regulations of law, which is the basis for calculating the remaining use value of goods, when requesting the customs authority to grant tax refund. The ratio of import tax refunded shall be proportional to the remaining use value of goods.

Example: Company X temporary import the brand new machine Y for construction and has paid VND 100 million of import tax. The machine is re-exported from Vietnam after it is used for 03 years. Company X declares the depreciation ratio of 40% for 03 years, the corresponding import tax redunded is 60% of the paid import tax: 60% x VND 100 million = VND 60 million.

In case the imported machinery, equipment, instruments are not re-exported upon expiration of the temporary import period and are transferred to another entity in Vietnam, the transfer shall not be considered export, thus export tax shall not be refund and the buyer shall not pay import tax. When such goods are exported from Vietnam, the initial importer shall receive a refund of import tax as instructed in this Clause.

10. With regard to exported, imported goods sent by an overseas entity to another entity in Vietnam by post or international aexpress mail and vice versa, if tax has been paid by the service provider but goods cannot be delivered to the consignee and have to be re-exported, re-imported, confiscated, or destroyed, then the paid tax shall be refunded as prescribed by law.

11. In case an entity whose goods are under the management of the customs commits customs offences and such goods are confiscated by a competent authority as exhibits, the paid export tax or import tax shall be refunded.

12. If export tax, import tax on certain goods has been paid and then tax exemption or tax refund is granted by a competent authority, paid tax shall be redunded.

13. In case exported or imported goods have have to be destroyed after the customs declaration is registered because of some violation discovered by the customs, the customs authority shall issue a decision of cancellation of export tax or import tax (if any). Penalties for improper export, import of goods that lead to destructions of goods shall comply with applicable regulations of law. The customs authority where the customs declaration is registered must retain documents about destroyed goods, cooperate with relevant agencies in supervising the destruction in accordance with applicable regulations of law.

14. If the tax refund of an application is smaller than VND 50,000, the customs authority shall reject it and does not make the refund.